If you’ve rented an apartment in the US in the past several years, you may have had the sense that the game was rigged: Prices creep up not only at your building but at others throughout the city, seemingly in lockstep. A new civil lawsuit brought by the US Department of Justice today alleges that in many cases it’s not just in your head—and that a single company’s algorithm is to blame.
That company is RealPage, a Texas-based firm that provides commercial revenue management software for landlords. In other words, it helps set the prices of apartments. But it does so, the DOJ alleges in its lawsuit, by effectively helping its clients cheat; landlords feed rental rate and lease terms into the system, and the RealPage algorithm in turn spits out a suggested price that enables coordination and hinders competition.
“By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices,” deputy attorney general Lisa Monaco said in a statement.
RealPage’s reach is broad. It controls 80 percent of the market for software of its kind, which in turn is used to set prices of around 3 million units across the country, according to the DOJ. It already faces multiple lawsuits, including one from the state of Arizona and another in Washington, DC, where RealPage software is allegedly used to price more than 90 percent of units in large apartment buildings. RealPage’s algorithmic pricing first gained broader attention when a 2022 ProPublica investigation detailed how the company’s YieldStar software works.
The DOJ civil lawsuit, which was joined by the attorneys general of eight states, is a significant escalation in legal action against the company. It’s also a first for the DOJ, according to officials speaking on background during a call to discuss the complaint. While the government had previously filed criminal charges against an Amazon seller for algorithm-enabled price-fixing, this is the first civil action in which the algorithm itself, the Justice Department official says, was effectively the means of the violation.
The complaint itself quotes RealPage executives allegedly acknowledging anticompetitive aspects of its product. “There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” one RealPage executive allegedly wrote.
RealPage has repeatedly denied any allegations of antitrust violations, going so far as to publish a six-page digital pamphlet that claims to tell “the Real Story” about its products, along with an extensive FAQ page on a dedicated public policy website. The company did not immediately respond to a request for comment. “Attacks on the industry’s revenue management are based on demonstrably false information,” one section of that site reads. “RealPage revenue management software benefits both housing providers and residents.”
“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” said Jennifer Bowcock, senior vice president of communications and creative at RealPage, in an emailed statement. “RealPage’s revenue management software is purposely built to be legally compliant, and we have a long history of working constructively with the DOJ to show that.”
The DOJ disagrees. “Algorithms don’t exist in a law-free zone,” said Monaco in a press conference to discuss the case. “Training a machine to break the law is still breaking the law.”
In this case, the complaint alleges that those algorithms consistently drove rental prices upward. “RealPage’s software tends to maximize price increases, minimize price decreases, and maximize landlords’ pricing power,” said the DOJ in a press release. RealPage also doesn’t just recommend prices; in many cases, it actively sets them.
“RealPage actively polices landlords’ compliance with those recommendations,” said US attorney general Merrick Garland in today’s press conference. “A large number of landlords effectively agree to outsource their pricing decisions to RealPage by using an ‘auto-accept’ setting that effectively permits RealPage to determine the price a renter will pay.”
The DOJ also claims RealPage has created a “self-reinforcing feedback loop” with its data intake and pricing recommendations structure that also gives it an alleged monopoly in the apartment revenue management software industry. Any competitor who plays by the rules, the DOJ claims, is at a distinct disadvantage.
The Justice Department has spent the past several years staffing up with technologists and data scientists, better enabling them to “interrogate the code,” as multiple officials described the investigative process. While this is the first major algorithmic collusion case, DOJ officials suggested it would be far from the last.
Update 8/23/24 4:34pm ET: This story has been updated with a statement from RealPage.
